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Pendse missive says he was made a scapegoat

Rakesh P Sharma & Yashajit Saha

Dilip S Pendse, former managing director of Tata Finance Ltd, has said that he had kept the company's board informed of all developments and was made a "victim or a scapegoat." He said he was blamed "for operating losses and erosion in the value of investment portfolio caused by the unprecedented fall in the share prices."

In a letter to Tata Finance chairman FA Mehta dated July 21, Pendse said: "All the decisions in the board meetings of Niskalp under the chairmanship of JE Talaulicar and Tata Finance under your chairmanship were taken after the required disclosure to the satisfaction of the directors present on the basis of unanimity and, therefore it is surprising and conveniently now an attempt is being made to make me a scapegoat by shifting the entire blame on my shoulders."

Earlier this week, Tata Finance filed a complaint of cheating, falsification of accounts, forgery and criminal breach of trust against Pendse and five other senior company executives with the Bombay police. It also sought the revocation of Pendse's passport.

Pendse's letter, however, was written in response to a letter by Mehta dated May 31, and not with reference to Tata Finance's complaint lodged with the police.

Tata Finance has seven subsidiaries including Niskalp. It lent over Rs 4 billion to Niskalp Investment & Trading Company, largely through inter-corporate deposits. The Tata Finance complaint said that Pendse was involved in unauthorised diversion of funds from Tata Finance to Niskalp. It held Pendse responsible for illegally and unauthorisedly diverting over Rs 4 billion of Tata Finance funds to Niskalp.

"I deny that I had forced Tata Finance to take large exposure in Niskalp. All the transactions pertaining to the said inter-corporate deposits were at all times known to you and the directors of Tata Finance and Niskalp," Pendse said in his letter to Mehta.

He also said that the poor financial condition of the company was discussed from time to time, including at two board meetings held on April 25 and 30. Pendse also said that the agenda of the board meeting held on April 30, listed the details of the total borrowing by Niskalp and that this included the total borrowing of Rs 4 billion by Niskalp from Tata Finance.

Pendse alleged in his letter that at the April 30 board meeting, K A Chaukar, managing director of Tata Industries and a director of Tata Finance, had asked Tata Finance company secretary B R Gazdar to tear off page 60 (of a review report of operations of Tata Finance and its subsidiaries circulated among the directors). The page contained Niskalp's total borrowings from various sources, including Tata Finance. Chaukar reportedly directed the company secretary and executive director "not to record the extent of borrowings by Niskalp from Tata Finance in the minutes of the meeting". Chaukar was unavailable for comment.

Pendse also mentioned that Niskalp had not invested more than one-third of the funds given by Tata Finance in investment activities. He said: "In or about March/April 2001, about Rs 1.10 billion were advanced by Tata Finance to Niskalp for funding of securitisation of the Telco bill market scheme -- dues of Telco dealers -- and this funding from Tata Finance to Niskalp came up for discussion in the board meeting of Tata Finance many a time, particularly during the discussion on exposure to Telco dealers from Tata Finance and Niskalp. The total exposure of Niskalp on Telco dealers after securitisation was around Rs 2 to Rs 2.25 billion which was mainly done at the behest and recommendation of the Telco management and also business interest of Tata Finance."

Asked to comment on all this, Tata group sources said that the issues did not relate to operational losses but to criminal culpability. These will be brought up through the due process of law, they said. They added that a first information report had been lodged, and this dealt not with corporate lapses but with criminal culpability. They stressed that the key issues were falsification of accounts, misleading the board and so on.

Finally, a Tata source added, "This (the letter) is a smokescreen to divert attention from the main issues. If Pendse feels so strongly, he should take the matter up in court, which is the best way of getting redressal."

Tata Finance also alleged in its complaint that Pendse had cheated the Reserve Bank of India by filing a false declaration on Tata Finance's capital adequacy ratio. Pendse, however, claimed in his letter that at a meeting specially held on October 21, 2000, a presentation was made to Mehta and Chaukar on the issues arising out of the under-capitalisation and higher debt-equity ratio of Tata Finance as raised by the RBI. The presentation was made by Tata Finance CFO R V Ramanujam, and Ashok Gaitonde, the company's treasury chief. The meeting was attended by Pendse, Subodh Shah (now Tata Finance managing director) and Gazdar.

Pendse ends his letter by saying that, in view of all this, Mehta's letter "making several allegations against me is totally unfair and unjust and I do not deserve this treatment from the company after serving the Tata group for more than 22 years to the best of my abilities and in good faith."

Criminal breach of trust, feels Tata Finance

In its complaint, Tata Finance Ltd has accused Pendse of criminal breach of trust in diverting large amount of funds from Tata Finance to Niskalp through inter-corporate deposits.

It also said that Pendse had entered into circular transactions from September 1999 to March 2001. This was intended to mislead the board and the regulators about the exposure of the company to Niskalp, the actual financial position and the company's non-compliance with RBI guidelines.

"These activities amount to cheating and falsification of accounts," the complaint said.

The Tata Finance complaint also accused its former managing director of back-dating transactions with a view to artificially showing profits in Niskalp and suppressing losses, on the basis of forged documents.

It also said Pendse prepared and issued a letter of offer containing false and misleading information with a view to inducing Tata Industries and other group companies and small investors to invest large sums of money in the company.

It also accused Pendse of cheating the Reserve Bank of India by filing a false declaration that the company maintained the central bank-stipulated capital adequacy ratio -- an offence punishable under section 415 and 420 of the IPC.

Among other things, it also said that Pendse cheated the Tata Finance board of directors by concealing the losses.

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